Correlation Between Dost Steels and IBL HealthCare
Can any of the company-specific risk be diversified away by investing in both Dost Steels and IBL HealthCare at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dost Steels and IBL HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dost Steels and IBL HealthCare, you can compare the effects of market volatilities on Dost Steels and IBL HealthCare and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dost Steels with a short position of IBL HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dost Steels and IBL HealthCare.
Diversification Opportunities for Dost Steels and IBL HealthCare
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dost and IBL is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dost Steels and IBL HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBL HealthCare and Dost Steels is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dost Steels are associated (or correlated) with IBL HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBL HealthCare has no effect on the direction of Dost Steels i.e., Dost Steels and IBL HealthCare go up and down completely randomly.
Pair Corralation between Dost Steels and IBL HealthCare
Assuming the 90 days trading horizon Dost Steels is expected to under-perform the IBL HealthCare. But the stock apears to be less risky and, when comparing its historical volatility, Dost Steels is 2.05 times less risky than IBL HealthCare. The stock trades about -0.06 of its potential returns per unit of risk. The IBL HealthCare is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 3,440 in IBL HealthCare on September 12, 2024 and sell it today you would earn a total of 1,269 from holding IBL HealthCare or generate 36.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dost Steels vs. IBL HealthCare
Performance |
| Timeline |
| Dost Steels |
| IBL HealthCare |
Dost Steels and IBL HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dost Steels and IBL HealthCare
The main advantage of trading using opposite Dost Steels and IBL HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dost Steels position performs unexpectedly, IBL HealthCare can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IBL HealthCare will offset losses from the drop in IBL HealthCare's long position.| Dost Steels vs. AKD Hospitality | Dost Steels vs. TPL Insurance | Dost Steels vs. Matco Foods | Dost Steels vs. Pakistan Tobacco |
| IBL HealthCare vs. Masood Textile Mills | IBL HealthCare vs. Fauji Foods | IBL HealthCare vs. KSB Pumps | IBL HealthCare vs. Mari Petroleum |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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